Moody's: China property sales growth to slow in 2016; home prices to recover at a slower pace

Moody's Investors Service expects nationwide property sales growth in China (Aa3 stable) to exceed 10% year for the full-year 2015, but to slow to a modest 0%-5% in 2016, as the effect of supportive monetary and regulatory policies will have been largely reflected in 2015 sales. The stronger sales growth in 2015 also resulted in a higher base for comparison.

"We believe the positive sales momentum seen this year -- with national sales up 18.0% year on year in January-October 2015 -- is the result of the supportive government policies implemented since 2H 2014," says Kaven Tsang, a Moody's Vice President and Senior Credit Officer.

"While growth will slow in 2016 as the effect of such policies tapers off, the leading and financially strong rated developers should continue to gain market share and increase sales as the industry consolidates," adds Tsang.

Tsang was speaking on the release of the November issue of Moody's China Property Focus.

Moody's monthly report further highlights that residential home prices continued to recover in October 2015 for China's 70 major cities, although at a slower pace than earlier this year.

The number of cities that registered home price declines fell to 54 in October from 58 in September. At the same time, the number of cities registering more than 5% year-on-year decline fell to only five from 12.

On the other hand, fewer cities reported month-on-month price growth in October, indicating that upward pricing pressure is easing.

Moody's report also addresses the impact from onshore bond issuance for the rated Chinese property developers, which jumped to $31.8 billion year to date as of 24 November 2015, from $1.9 billion for the full year 2014.

Moody's says the increase in onshore issuance has been positive for developers' credit profiles, because it lowers their average funding costs, enhances liquidity, diversifies funding channels and lengthens debt-maturity profiles.